BIR Ruling [DA-431-99]

July 27, 1999 BIR RULING [DA-431-99] Siguion Reyna Montecillo & Ongsiako 8755 Paseo de Roxas, Philcom Building Makati City Attention: Atty. Romarie G. Villonco Gentlemen : This refers to your letter dated December 1, 1998 stating that Mesdames Delza V. Lazatin and Thelma V. Mabanta and Messrs. Romeo G. Villonco, Jr., Rolando Mario G. Villonco, Rennan G. Villonco and Manuel O. Gallego (Parties) are the registered co-owners in equal portions of three (3) parcels of land together with the improvements thereon located in Manila containing a total land area of 1,728.55 square meters and covered by TCT Nos. 230853, 203854 and 156902 issued by the Registry of Deeds for Manila; and that the parties intend to execute a Deed of Extrajudicial Partition which will divide the aforementioned properties as follows: 1. Lot A covered by TCT No. 230853 together with the improvements thereon covered by Tax Declaration No. 96-00234 shall appertain and belong to Delza V. Lazatin, Romeo G. Villonco, Jr., Rolando Mario G. Villonco, Rennan G. Villonco and Thelma V. Mabanta; 2. Lots B and C, covered by TCT Nos. 230854 and 156902 shall appertain and belong to Manuel O. Gallego, Jr. In connection therewith, you now request for a ruling as to whether or not the extrajudicial partition of the aforementioned properties by the above-mentioned co-owners is subject to capital gains tax and documentary stamp tax. In reply, please be informed that Section 24(D) of the Tax Code of 1997, provides that a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the said Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts: . . ." Considering that there is no sale, exchange nor disposition of property in the above-mentioned transaction but merely a partition of the properties among the co-owners which rightfully belong to them and without any consideration, it is not subject to income tax and consequently to the capital gains tax imposed under Section 24(D) of the Tax Code of 1997. DHSCEc Moreover, the partition of the said properties among the co-owners is not subject to documentary stamp tax imposed under Section 196 of the Tax Code of 1997 since no taxable document was executed for the said transaction. (BIR Ruling No. 258-91 dated December 3, 1991) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)